Israel fumes over planned EU labelling of "settlement" products

TEL AVIV, Nov 10 (Reuters) - Few issues have caused more
friction between Israel and the European Union than EU plans to
impose labelling on goods produced in Jewish settlements on
occupied land. And if Israel is right about the timing, the
tensions could get worse.

The European Commission, the EU's executive, is keeping
tight-lipped about when the labelling measures will be approved.

But Israeli officials are convinced it will happen at a
meeting in Brussels on Wednesday and are doing all they can to
lobby against it. U.S. senators have written to the EU's foreign
policy chief urging her not to go ahead with the move.

"This is a discriminatory policy," Energy Minister Yuval
Steinitz said on Tuesday, a common Israeli refrain. "We all
remember when Jewish products were last labelled in Europe," he
said, referring to Nazi Germany's anti-Semitic policies.

The EU does not recognise Israel's occupation of the West
Bank, Gaza, East Jerusalem and the Golan Heights, lands it
captured in the 1967 Middle East war, and says the labelling
policy aims to distinguish between goods made inside the
internationally accepted borders of Israel and those made
outside.

"It's an indication of origin, not a warning label," the EU
ambassador to Israel, Lars Faaborg-Andersen, told Reuters.

Some EU countries already affix labels to Israeli goods,
differentiating between those from Israel and those,
particularly fruits and vegetables, that come from the Jordan
Valley in the occupied West Bank. If the Commission goes ahead
on Wednesday, all 28 member states would have to apply labels.

Asked repeatedly about the timing of the decision by
European lawmakers on Tuesday in Brussels, the EU's envoy to the
Middle East, Fernando Gentilini declined to comment, saying
only: "It is in the pipeline, it is coming."

Gentilini sought to play down the guidelines during the
hearing at the European Parliament's Foreign Affairs Committee.
"It is not a boycott on the country ... It is about
implementation of EU legislation. It is nothing new, it is for
things that already exist," he said.

From an economic point of view, the effect may be minimal.
Consumers that want to avoid Israeli settlement goods probably
already do so. Those who want to actively support Israel may now
seek out settlement products to buy.

Israel's Economy Ministry estimates the impact will be about
$50 million a year, affecting fresh produce such as grapes and
dates, wine, poultry, honey, olive oil and cosmetics.

That is around a fifth of the $200-$300 million worth of
goods produced in settlements each year, but a drop in the ocean
next to the $30 billion of goods and services Israel exports to
the EU annually, a third of all its exports.

Israeli ministers have cast the EU's plans as akin to a
boycott of Israel, regarding it as little different to the
boycott, sanctions and divestment (BDS) movement that
Palestinians - who seek a state on occupied land including the
West Bank and East Jerusalem - have advocated in recent years.

They have also accused the EU of double standards, saying EU
labelling is not enforced in other places of occupation, such as
northern Cyprus, Western Sahara, Kashmir or Tibet.

Faaborg-Andersen dismissed any suggestion of a boycott,
pointing out that the EU was not telling consumers what to do -
labels merely help them decide if they want a product or not.

He also said that the case of Cyprus, in which the north is
not under government control and goods produced there are
considered to be from Cyprus, "is an internal EU issue".

The island has been split since a 1974 Turkish invasion; the
the south is controlled by Cyprus's internationally recognised
government and is an EU member country.

SQUEEZE ON FARMERS

While the ultimate impact may be marginal, some farmers in
the West Bank could cease activity, said Yaron Solomon, head of
the settlement department at Israel's Farmers' Union.

Also potentially affected are the more than 20,000
Palestinians who work in settlements, earning salaries far
higher than those working on Palestinian-run farms.

That argument holds little sway with EU officials.

The World Bank estimated in 2013 that easing restrictions on
Palestinian activity and production in areas under full Israeli
military occupation would add $3.4 billion a year to the
Palestinian economy, boosting opportunities. Most of these
restrictions are in place to protect Israeli settlements.

Some Jewish producers say their business will be unaffected.

Shiloh Wineries, which exports half of the more than 100,000
bottles of wine it produces annually, built its business around
its West Bank location of Shiloh - the ancient capital of Israel
before Jerusalem. The company said that biblical reference is
what appeals to many Jews and Christians.

In the Jordan Valley, 900 farms earn $200 million a year,
mainly from exports of dates and other produce, and employ 6,000
Palestinians. But the EU accounts for only about 10-20 percent
of Jordan Valley exports as farmers have found new markets in
Russia and Asia, even if rouble weakness has hurt them recently.

Ohad Cohen, head of the Foreign Trade Administration in
Israel's Economy Ministry, said origin rules already in place in
Britain, Belgium and Denmark had had little impact on exports.

While Asia this year overtook the United States as Israel's
second-largest market, excluding diamonds, Cohen said Europe
would remain a natural market for Israeli products.
(Additional reporting by Lianne Gross, Ali Sawafta and Robin
Emmott; Editing by Luke Baker and Mark Heinrich)